Is the Aging Workforce Really Creating Your Skill Shortages?

Many executives today worry that skill shortages threaten their organization’s ability to grow and innovate. A recent survey I designed for one manufacturing sector found that almost 60% of managers responding thought skill shortages were already hurting their firm’s productivity and quality. These numbers have been supported in other studies.

But, despite a seriously aging population in the U.S. and the rest of the industrialized world, only 4% of this same group saw the aging workforce as an immediate threat to performance. Most expect the effects of aging Boomers to come 3-5 years (37%) or in 5-10 years (37%) out. About 20% don’t see the aging workforce as a concern at all.

This survey shows leaders don’t necessarily see a connection between the aging workforce and the negative impacts of skill shortages. Instead, most executives today focus on their immediate source of pain—the difficulty of finding and retaining young skilled talent for specific jobs, no matter how strategic. I’ve interviewed healthcare CEOs, for example, who seemed most concerned with filling hospital housekeeping jobs. This disconnect between an aging workforce and skill shortages is consistent with my previous research.

But making misguided assumptions about the huge generation now approaching retirement will be very costly if critical capabilities are at stake. To mitigate the most serious effects of skills shortages, you must accurately diagnose their causes and risks. That demands an accurate accounting of who in the organization is near retirement and which essential strategic skills and capabilities they’re taking with them when they leave.

Managers who do this usually face one of four different scenarios. Each one calls for a different response.

“Our aging workforce clearly impacts essential capabilities and we know what specific skills are at risk.”

This is the perception in a variety of fields today, such as nursing, petroleum engineering, and welding.

In this case, the relationships between older and younger workers are critical. Older workers can be part of the solution (e.g., mentoring effectively), or they can exacerbate the problem, refusing to retire or share their knowledge. Executives facing this situation must pay special attention to retaining and utilizing older workers effectively. In addition, initiatives designed to improve mentoring skills and other knowledge transfer practices should be put in place to accelerate development and retention of younger staff. Organizations like Boston Scientific, MITRE, and some nuclear power plants have put elaborate programs in place to address specific knowledge transfer needs.

“The critical skill shortages we face have no connection to the aging workforce.”

Not all skills gaps are due to looming retirements. For example, shortages of mobile app developers, networking engineers, and sustainability managers are due to the rapid growth of new industries. These jobs didn’t exist a decade ago, and there is no older generation to draw on. This poses different challenges, such as identifying patterns of your most successful hires, like the schools they come from, where they live, and other characteristics that predict high performance and retention.

For example, one Wisconsin manufacturer has its top executives on the boards of three local technical schools to influence curriculum needed in its new hires. A fast-growing Oregon software firm improves retention of hard-to-find software developers by being upfront about the organization’s flaws and explicitly describing plans to fix things. They also emphasize cultural values like sustainability and community service that they know are important to young developers.

“We expect the aging workforce to be a problem, but we don’t know what skills are at risk.”

Lots of organizations face this situation today. In the manufacturing survey, most managers expected the impacts of aging Boomers will occur sometime in 3-10 years. They know a problem is looming, but they have no idea where the specific risks are. As long as the threat is vague, it’s impossible to take effective action. Smart leaders, like those at a GE testing facility and in one community hospital have used tools like the Knowledge Silo Matrix to pinpoint specific knowledge most at risk, given the likely departure of particular employees.

“We have no idea if the aging workforce is a problem and we’re unaware of any looming skills gaps.”

Some lower skill sectors (e.g. retail, fast food) may be able to take this position. But not knowing what you don’t know about the relationship between changing workforce demographics and critical skill shortages is a high-risk strategy for most leaders.

Have you diagnosed your risks correctly?

The first step in this case is to get a detailed age profile of employees and managers in all essential functions. Don’t let your HR department tell you that the average age of your engineers is 42. Who cares? Find out which veteran employees or hard-to-replace managers are approaching retirement age. Only then can the real risks of capability shortages become obvious.

The challenges of an aging workforce and critical skills gaps will be with us for years to come. Clarifying links between changing demographics and skill shortages is essential for leaders who want to mitigate the risks these threats pose for performance.